Measuring preferences over the temporal resolution of consumption uncertainty

Thomas Meissner, Philipp Pfeiffer

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Timing premia measure how much consumption people are willing to forgo to resolve all consumption uncertainty immediately. We develop a novel experiment to elicit these attitudes directly in a model-free way. On average, subjects forgo around 5% of their total consumption to resolve all uncertainty immediately. Recursive utility models postulate a structural link between timing premia and deep preference parameters. We elicit these preference parameters separately and estimate corresponding predicted timing premia. Comparing directly elicited and predicted timing premia allows us to test this structural link. Surprisingly, we find a negative correlation between predicted and elicited timing premia.
Original languageEnglish
Article number105379
Number of pages49
JournalJournal of Economic Theory
Volume200
DOIs
Publication statusPublished - Mar 2022

JEL classifications

  • c91 - Design of Experiments: Laboratory, Individual
  • o40 - Economic Growth and Aggregate Productivity: General
  • g12 - "Asset Pricing; Trading volume; Bond Interest Rates"
  • e24 - "Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital"
  • e44 - Financial Markets and the Macroeconomy

Keywords

  • preference elicitation
  • recursive utility
  • risk and time preferences
  • timing of resolution of uncertainty
  • timing premia
  • SUBSTITUTION
  • Timing of resolution of uncertainty
  • COGNITIVE REFLECTION
  • Preference elicitation
  • BEHAVIOR
  • LONG-RUN
  • RETURNS
  • RISK-AVERSION
  • ATTITUDES
  • Timing premia
  • Risk and time preferences
  • GROWTH
  • Recursive utility
  • UTILITY

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